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Costs Law Update – Various Claimants v Gower Chemicals Ltd _ Others

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									                                                     - The Defendant Costs Specialists



Costs Law Update – Various Claimants v Gower Chemicals
Ltd & Others
A recent decision, Various Claimants v Gower Chemicals Ltd & Others (Cardiff
County Court, 28/2/07), has done much to nullify the effect of the old Collective
Conditional Fee Agreement Regulations 2000. This was an appeal heard by Mr
Justice Field (sitting as a County Court Judge) from a decision of Master Wright of
the Supreme Court Costs Office.

The decision concerned the operation of Regulation 5 of the Regulations which states:

       “(1) Where a collective conditional fee agreement provides for a success
       fee the agreement must provide that, when accepting instructions in relation to
       any specific proceedings, the legal representative must prepare and retain a
       written statement containing –

              (a)      his assessment of the probability of the circumstances arising
                       in which the percentage increase will become payable in
                       relation to those proceedings (“the risk assessment”);

              (b)      his assessment of the amount of the percentage increase in
                       relation to those proceedings, having regard to the risk
                       assessment; and

              (c)      the reasons, by reference to the risk assessment, for setting the
                       percentage increase at that level.”

The CCFA being considered echoed the wording of the Regulations in the following
terms:

              “5.2 When accepting instructions in relation to any specific
              proceedings Thompsons must prepare and retain a written statement
              containing:

              5.2.1    their assessment of the probability of the circumstances
                       arising in which the success fee will become payable in
                       relation to those proceedings (“the risk assessment”);

              5.2.2    their assessment of the amount of the success fee in relation to
                       those proceedings, having regard to the risk assessment; and

              5.2.3    the reasons, by reference to the risk assessment, for setting the
                       success fee at that level.”



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The Defendants alleged that the Claimants’ solicitors, Thompsons, had breached the
Regulations by failing to prepare a three-stage risk assessment in respect of each
Claimant in the form envisaged by the Regulations and as required by the CCFA
itself. They alleged that this was a material breach of the Regulations such as to
render the retainer invalid. Alternatively that the performance of this contractual
provision was a condition of the enforceability of the implemented CCFA or that the
preparation and retention of a conforming risk assessment was a contractual condition
precedent to formation of an individual contract of retainer.

The Claimants’ case was that the Regulations simply required the CCFA itself to
contain the provision required by Regulation 5(1). There was no actual requirement
that individual risk assessments also had to be prepared that complied.

The Judge accepted the Claimant’s arguments. In his judgment:

        “the natural and ordinary meaning of the regulation is that there must be a
        provision in a CCFA that complies with the specification set out in the
        regulation. Regulation 5(1) does not additionally require that the prescribed
        provision must be performed… As Lord Philips remarked in Thornley, there
        is an obvious reason why the CCFA Regulations are less exacting than the
        CFA Regulations. In contrast to the latter, whose object is to protect the lay
        client who is contemplating entering into a CFA, the former are concerned
        with bulk purchasers of legal services who are less vulnerable.”

In his judgement a breach of the requirement may give rise to a right to the funder to
terminate the CCFA, rely on the breach as a defence to a claim by the solicitor for
costs and to a right to claim damages. Further, the requirement was not a condition
precedent to the formation of an individual contract of retainer but was simply an
innominate term. The Judge was satisfied that his conclusions did not produce an
absurd result.

The Court of Appeal, when considering whether an alleged breach of the CFA
Regulations 20001 or the CFA Order 20002 invalidated the retainer, held that the
proper test was whether the particular breach “had a materially adverse effect either
upon the protection afforded to the client or upon the proper administration of
justice?”. It would therefore appear that when attempting to interpret the purpose of
any of the individual CFA or CCFA Regulations this should be done by determining
which of these two aims it is designed to cover.

The requirement in Regulation 5(1) of the CCFA Regulations does not appear to serve
any obvious purpose in terms of the protection afforded to the client. The provision is
surely aimed at the administration of justice in that the preparation of a proper risk
assessment is crucial to assist in determining at detailed assessment whether a success
fee has been set at a reasonable level at the time the instructions are accepted. The
interpretation of the Regulation in Gower totally undermines any such protection to
the administration of justice. Any contractual right that the funder may have is of no
assistance to the Court attempting to assess a success fee in the absence of a proper
risk assessment.

If this interpretation is correct it creates an equally surprising result in respect of
Regulation 4(2) which states as follows:




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          "A collective conditional fee agreement must provide that, when accepting
          instructions in relation to any specific proceedings the legal representative
          must -

                  (a) inform the client as to the circumstances in which the client may be
                  liable to pay the costs of the legal representative"

This Regulation closely mirrors Regulation 2(1)(b) of the CFA Regulations and is
clearly aimed at the protection afforded to the client. However, the Gower
interpretation would mean that this Regulation is complied with simply by the CCFA
stating that the client will be appropriately informed. There is then no duty to actually
give any information at all to the client. This outcome certainly appears to the writer
to produce an absurd result. It will be interesting to see if this matter proceeds to the
Court of Appeal. Unless and until that happens the CCFA Regulations 2000 are dead
in the water so far as defendants are concerned.
1
    When considering CFAs in Hollins v Russell [2003] EWCA Civ 718.
2
    When considering CCFAs in Jones v Caradon Catnic Ltd [2005] EWCA Civ 1821.



                                            Contact

          If you wish to discuss the contents of this update in more detail contact:

                                     Simon Gibbs
                                  Tel: 020-7096-0937
                           Email: simon.gibbs@gwslaw.co.uk
           Address: Gibbs Wyatt Stone, 68 Clarendon Drive, London SW15 1AH
              DX: 142502 Enfield 7 (please note our change of DX address)
                             Website: www.gwslaw.co.uk

                                      Gibbs Wyatt Stone
                            Dedicated to providing the level of
                            expertise expected from specialist costs
                            counsel and the range of services
                            provided by traditional costs draftsmen.




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